Eli Lilly Cuts Deal for the Rights to a New Diabetes Drug from

Eli Lilly & Company will pay up to $325 million to Amylin Pharmaceuticals, a biotechnology company based in San Diego, for the rights to a potentially promising treatment for diabetes. The drug, a synthetic version of a compound found in the venom of a poisonous lizard known as the Gila monster, could become an alternative to insulin injections for some people with Type II, or adult onset, diabetes, which accounts for most of the 17 million cases of diabetes in the United States.

Some evidence shows that the drug, known as AC2993, can reduce the risk of low blood sugar, which can cause diabetics to lose consciousness. It also might not cause the weight gain associated with taking insulin injections. The drug, which is injected twice a day, is in the final stage of clinical trials and could reach the market as early as 2005, executives said.

The deal provides needed cash and a big-name endorsement for Amylin, a company that has had its share of setbacks and almost went out of business four years ago. Amylin, which has no products on the market yet, had enough cash left to last only a year.

The accord will also provide a strong marketing partner in Lilly, a leading supplier of insulin. "It gives us a global capacity faster than we could have created ourselves," said Joseph C. Cook Jr., chairman and chief executive of Amylin, who spent more than 20 years at Lilly.

Lilly was developing a drug similar to Amylin’s on its own. But that drug did not meet expectations in a clinical trial that ended in July, putting pressure on Lilly to find an alternative. Amylin’s drug "is anticipated to be the first to market among this new class of therapy," said Terra L. Fox, a Lilly spokeswoman.

Under the terms of the deal, Lilly will make a nonrefundable payment of $80 million to Amylin and will also spend $30 million to buy about a 2 percent stake in the biotechnology company for $18.69 a share, a 50 percent premium to the closing price of $12.40 on Thursday.

As much as $215 million in additional payments will be made by Lilly only if certain goals are met in developing and commercializing the drug.

AC2993, also known as exendin-4, is being tested for patients with Type II diabetes who cannot control their blood sugar with pills like Glucophage,. These patients normally start taking insulin.

AC2993 is part of a class of drugs under development similar to a natural protein called glucagon-like peptide-1, or GLP-1. GLP-1 stimulates the body to produce insulin, but only when blood sugar levels are high.

The problem with injecting insulin is that the body can get too much, leading to low blood sugar and loss of consciousness. Because GLP-1 stimulates insulin production only when it is needed, it might reduce such problems. Still, one trial of AC2993 still showed a fairly high level of such so-called hypoglycemic events. Plus it induces nausea in some cases.